From time to time, people might find themselves in the situation where they have to prove their income.

That can be things like getting a refinance, bank loans, and the topic today is when they have to prove their income as part of a compensation claim.

I'm joined today by Jenny Letts and Justine Porter of MCW Legal to discuss. 

Jenny, throwing to you in the first instance, could you give me an overview of one of the big problems people face when trying to prove future losses?

Jenny Letts | Accountant

One of the big problems I find most people have is that it's completely overlooked the fact that there may be a loss of intellectual property. The value that they hold in that is now gone.

Justine, do you see this with some clients where they potentially don't understand or underestimate the value of the intellectual property they hold?

Justine Porter | Lawyer

We most certainly do. Realistically, anyone who's built themselves some form of business or an interest that separates them from anyone else in the industry, definitely has some form of intangible loss that needs to be calculated in their economic loss claims.

To prove these tangible losses, where do we start?

Jenny Letts | Accountant

The first thing we need to do is understand their business.

We need to understand how that works, how they run it, and how they get their income. Who their clients are and how that income comes through.

You tend to find it's more those very niched businesses that have intellectual property.

Something like a plastic surgeon, perhaps?

Jenny Letts | Accountant

Absolutely. Good examples of people who have intellectual property, like I said before, these real niched businesses.

They are people who have years and years of experience, that use that experience. That experience could be in terms of education, but also training and methods that they've come up with themselves that make whatever they produce, whatever they service, quite individual to them.

Their clients will go to them because of the service that they get or the product that they get from that person.

In the real world, examples would be any sort of medical practitioner who has a niche business. We can do specific plastic surgeons that have reputations for being very good at particular areas. It could be dentists that have real niches inside orthodontics. It can also be consultants - so you may have an engineer that's very specialized in a field that it's just not that many people that do that particular role, and it's because they've niched right down into this small area that they receive work out of that. But they also use training and the methodologies and approaches that they've made themselves.

I take it that, when you're calculating quantum on these claims, you don't want to be overlooking something that is potentially quite valuable - like IP? 

Justine Porter | Lawyer

Certainly. If we do overlook something like the loss of intellectual property, or at least an impact on someone's intellectual property, ultimately, the person could be under-compensated for their claim.

That's definitely something that we would ensure that we'd always be looking into, particularly for these smaller companies or smaller businesses. We'd be, of course, obtaining evidence from people like Jenny, who'd be able to comment or help us understand those types of losses.

Jenny, why do you think people aren't including IP in their compensation claim?

Jenny Letts | Accountant

Valuing intellectual property is a unique skill in itself, and there aren't a lot of people who do that in Australia. 

It's also knowing when that's an issue as well.

Lots of people understand that there's such a thing as loss of goodwill. However, goodwill is all-encompassing. We can break that down into smaller elements, things like brand names, patents, databases, and intellectual property.

Not everyone knows that it's an issue, so that's probably why it's not done more often.

And Justine, what's your experience in the legal profession - why isn't IP considered more often?

Justine Porter | Lawyer

I suppose the main obstacle in the legal industry is properly understanding the person's interest or business to a full extent, and obtaining the information out of those people to ensure that we capture that. 

It's also quite important that we capture those because we need to prove to the respective party or the insurer, or ultimately a judge, as to the loss that the person may incur or has incurred as a result of any event that they may be involved in that ultimately has impacted their working capacity or their economic loss.

And Jenny, how could someone help themselves instantly to start overcoming these obstacles?

Jenny Letts | Accountant

I think the best thing for somebody to have at this stage would be a list of questions that they can go through and answer that's going to help them identify if this is an issue for them. And if we can work out by going through that list of questions, what it is, what type of intellectual property that they have, then we can know what documents we're going to need to ask for, and what's going to help us to support that claim.